Low supply turns home-bidding wars 'brutal'

Dec. 25, 2012

Updated Aug. 21, 2013 1:17 p.m.

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Patrick and Tanya Courchaine check a light fixture during an inspection on the Anaheim Hills home they hope will soon be theirs. The couple are in escrow. Many homes on the market, especially those price lower than $700,000, are getting multiple offers. MICHAEL KITADA, FOR THE REGISTER

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Home inspector Kevin Bussdieker, right, checks out an electric panel for Patrick Courchaine during an inspection at an Anaheim Hills home he wants to buy. MICHAEL KITADA, FOR THE REGISTER

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Patrick and Tanya Courchaine put a bid in on this Anaheim Hills house after losing out on another home in the area that got 19 offers. The seller at the other home went with a cash buyer. MICHAEL KITADA, FOR THE REGISTER

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Tanya and Patrick Courchaine kiss on the threshold of the Anaheim Hills house they hope will become their home. MICHAEL KITADA, FOR THE REGISTER

Patrick and Tanya Courchaine check a light fixture during an inspection on the Anaheim Hills home they hope will soon be theirs. The couple are in escrow. Many homes on the market, especially those price lower than $700,000, are getting multiple offers.MICHAEL KITADA, FOR THE REGISTER

When Tanya and Patrick Courchaine recently made an offer for $615,000 on a house in Anaheim Hills, they were up against 18 other buyers.

The couple figured they'd have it in the bag. In addition to offering $40,000 over the asking price and a healthy down payment, they went the extra mile to promote themselves – with a PowerPoint slideshow.

They lost to a cash buyer.

"We were very disappointed," said Tanya Courchaine, 42, an IT operations supervisor. "I convinced myself that with $40,000 over and 20 percent down we were going to get it for sure."

Bidding wars are raging in Orange County and elsewhere, making home shopping especially frustrating for those seeking properties under $750,000. Low inventory is driving the competition. And homebuyers are going head-to-head against investors, who typically pay cash.

The California Association of Realtors said last month a dramatic shortage of homes for sale in California has created an especially tough market for first-time buyers, with nearly 6 in 10 homes selling with multiple offers.

Fifty seven percent of homes sold in the second quarter got multiple offers, the highest percentage in at least the past dozen years, according to the association's 2012 Annual Housing Market Survey, released in November. Each of those homes received an average of 4.2 offers, up from 3.5 offers in 2011.

The seller's market has led to more properties being sold at or above the list price, with 41 percent of homes selling without a price chop, the highest since 2005 and up from a longtime average of 32 percent.

"It's brutal out there right now, especially in that lower price range," said Bill Arseneau, a broker associate with Realty One Group in Mission Viejo. But, he added, "I've been in the million-dollar-plus range and had multiple offers."

TRYING TO FORGE CONNECTIONS

Real estate broker Jeb Smith thought the price on the three-bedroom, single-level condo he listed might have been a bit too high.

But it drew prospective buyers by the dozens.

The 976-square-foot Santa Ana condo went in and out of escrow twice in a month. By the final sale in late November, Smith said, the home had racked up 80 offers. Half were for cash.

The bank-owned condo went for $240,000 – more than $34,000 over the asking price. It sold for $70,000 over the last comparable sale, said Smith, owner of Coastal Realty Group in Huntington Beach.

But Smith and many other real estate agents also know what it's like on the losing side of a bidding war.

"We've seen the prices get bid up and our buyers are panicking," Smith said. "This is happening to them 10, 15 times and they're not getting an offer accepted."

Some real estate agents coach their clients on strategies to help them stand out, including giving up some contingencies.

Robert Rivera, a broker associate at First Team Real Estate in Anaheim Hills, helps the prospective buyers he represents forge an emotional connection with sellers – even before an offer is made.

"We always include pictures of the (buyer's) family, multiple pictures, and a letter from my clients to the homeowners,'' he said. In the letters, his buyers cite improvements made to the home that they especially like.

And, he said, "After we submit an offer, we'll write a thank you letter.''

Tanya Courchaine said she and her husband, Patrick, looked at 60 homes in a month and a half, connecting with Rivera toward the end of that process. The couple is in escrow now after agreeing to pay $599,900 for a 1,890-square-foot, three-bedroom house on a 10,000-square-foot lot – even if the appraisal comes in lower, Rivera said.

The couple has experienced the bidding frenzy from both sides. They received 16 offers on their Garden Grove house, Tanya Courchaine said. They went with a cash buyer, she said, figuring their home wouldn't appraise for the highest offer.

Her advice to other homebuyers?

"Just be patient and maybe look at houses that are under what your budget is, because you're going to end up putting in offers above what your budget is. And just see as many houses as you can.''

Jon Perez, also with First Team in Anaheim Hills, represents a Canyon Terrace seller whose 1,800-square-foot, three-bedroom townhome was listed at $369,000. The property received 23 offers, most above the asking price by $10,000 to $20,000. Five offers were above $400,000.

'THE MARKET'S CHANGING TOO FAST'

December has been an unusually busy month, said Arseneau, the Realty One Group agent. "Who flipped what switch?'' he asked.

In south Orange County, many homes with asking prices ranging from the $400,000s to the $700,000s have been getting eight to 10 offers at a minimum, he said. And, he added, with all the competition, prices are escalating.

"I tell other agents and my buyers every day, comps are what is selling today,'' he said. "Three months ago doesn't have anything to do with anything. The market's changing too fast.''

Pam Spadafore, a real estate agent for Windermere Real Estate Southern California, got 14 offers on a 1,113-square-foot, two-bedroom, three-bathroom house in Lake Forest. The home, a short sale listed at $349,000 in July, sold in November for $352,000.

These days, she said, she may not even have to put a property on the multiple listing service to move it quickly. Her team has plenty of eager buyers, she said, and "I can sell it off of my buyer's list.''

"There's a lot of cash buyers out there,'' she said, especially for entry-level homes. Accepting a cash offer is a way for sellers evaluating multiple offers to avert lending issues, she noted, such as an appraisal coming in too low. Or the seller could be trying to avoid any delay that could cause a short sale to become a foreclosure.

"The seller says, 'I don't have to deal with someone with a loan, I'd rather go with an all-cash buyer,'" Spadafore said.

The prospect of getting into a bout isn't for everyone.

"We won't go into a bidding war,'' said Bronwyn Lynskey, who was checking out an open house in Newport Beach on Sunday for a five-bedroom bank-owned home with an asking price of just under $2 million. "We decided from the get-go. As soon as I walk into a place that's got the frenzy, I walk out.''

The listing agent on that property, Jeff Stokes of Coldwell Banker Previews International, was sure the home would sell quickly. Even before the open house, he said, he got three offers.

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